Running a Business in Nigeria? Time to Consider the Subscription Model

Segun Adeyemi
Feb 18, 2016 · 4 min read

Traditionally, most of us in Nigeria are used to the concept of ownership, where companies produce and sell stuff; we buy them and own them, giving us the full rights to ownership. Things are getting different now with the concept of shared economy. What makes this possible is that technology makes it easy for individuals to connect directly to products and services via the cloud.

As a business model, subscriptions and recurring billing have been around for decades, mostly in industries like publishing and cable television but it hasn’t been quite popular in Nigeria. I remember having a conversation a few years ago, with a few friends starting a digital content platform, they wanted to use the subscription model but we all agreed then that accepting recurring payments was the major challenge and they had to resort to a traditional pay per download model because the time wasn’t right then. This write-up seeks to discuss why businesses in Nigeria should consider the subscription model and why this might be a good time.

Why consider a subscription model?

- Your business needs a reliable revenue stream that arrives on a regular interval.

- You need to increase your revenue in the medium to long term.

- Your business is on the cloud and you want to charge a fee for your product usage.

- You need an easier way to forecast revenue and you want to be able to plan better.

- You want to build a stronger relationship with your customers and build loyalty.

- You want to automate your billing and invoicing system to free up time and reduce operations cost.

- You want your customers to be happy because they can consistently use your product or service without having to repeatedly take some other renewal action.

If you want or need any of the above for your business, you might want to consider the subscription option. For instance, if you run a membership club that charges a regular monthly fee, this can be automated with debit cards such that after the initial agreement between you and your members, the charges are made regularly without bothering your customers.

Imagine the impact of this model on your business; regular monthly revenue, predictable revenue, reduced cost and overhead and a relationship with customers that allows for additional sales or upgrades.

Why now is a good time for this model?

With the increasing penetration of electronic transactions in Nigeria and a fast growing and sophisticated middle class, this is the time you should really consider using a subscription model for your business.

There are now a number of payment methods and a few payment gateways that supports recurring payment that didn’t use to. Regulatory policies around the cashless economy are now supportive of automated debit using these different payment methods. Recurring payments can be charged directly to your customers with their debit cards without you having to constantly call to remind them to pay. Once your customers have given you the permission to debit their account on a regular basis, you can just watch the money roll in.

Also, there is a growing number of returnees who are used to paying for goods and services on a subscription basis that are constantly frustrated that they have to think about remembering to pay bills that they feel they can easily automate.

It shouldn’t get to this

So, which businesses can use the subscription model?

Almost every product or service can be packaged as a subscription business, it all depends on how it is structured. A few examples globally and locally include:

E-commerce: Ecommerce platforms are one of the fastest adopters of this model. Amazon uses the subscription model with their Amazon Prime where members receive upgraded shipping, free shipping, and “faster” shipping for a yearly fee. Companies like Supermart.ng and and many others are also exploring this model in Nigeria.

Digital Content: Nearly all paid digital content platforms globally use the subscription model. Spotify, Apple Music, Netflix, Hulu, FT, etc. In Nigeria, we have the likes of Spinlet, Iroko, Businessdayonline, etc also exploring this model.

SaaS Companies: There is a reason there are very few software as a service (SaaS) companies in Nigeria and this can be attributed to the fact that SaaS and subscription payments go hand in hand. Most of the biggest SaaS companies in the world use the subscription business model and traditional software companies like Microsoft and Adobe are also making the switch.

What do you need to get started?

Managing and accepting subscription payment is quite different from accepting one-time payments. There are essentially two payment methods that are effective and viable for the subscription model in Nigeria; automated direct debit from customer’s bank account and recurring debit using ATM cards. If you want to go with the card option, some of the things you will need include:

- A payment gateway that supports recurring payment

- A website or at least a valid email address.

- A billing system that is designed for recurring payments (you can build one internally or outsource to a company focused on this).

Remember, selling to a customer once is cool. Selling to a customer every week, month, or year is super awesome.

If you have read up to this point, think deeply about your business model and consider how the subscription/recurring payment model can work for your business. There are a lot of questions that will be covered in subsequent write-ups such as what are the things to consider and questions to ask before making the switch, how do you set your pricing, how do you get started, etc.

If you are considering the subscription model and will need more information and guidance, contact us at Amplify and we will be happy to help you get started. We want to help you and your business succeed by providing you with simple payment solutions.

Amplified Payments

Thoughts, stories, opinions, updates and announcements from the Team

Segun Adeyemi

Written by

Finance and Tech Guy. “Obabiolorunosi”. Dodo lover…

Amplified Payments

Thoughts, stories, opinions, updates and announcements from the Team

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